Honestly, I forgot the U.S. Treasury Department was buying mortgage-backed securities (MBS), since its program is much smaller than that of the Federal Reserve. Here’s an update from National Mortgage News (bold added):

The Treasury Department has purchased over $200 billion in Fannie Mae and Freddie Mac mortgage-backed securities to support the mortgage market, but now it has to decide if it will continue that support. “We expect to provide guidance by the end of the year,” Treasury spokeswoman Meg Reilly said. Treasury began the MBS purchase program after the two government-sponsored enterprises were placed in conservatorships in September 2008. At the time, Treasury said it would terminate the MBS purchase program by the end of 2009. During the summer, Treasury reduced its MBS purchases and it is currently buying about $10 billion a month.

And NMN says the Fed has about $250 billion more in MBS purchases planned (bold added):

The New York Federal Reserve Bank purchased $1.09 trillion in Fannie Mae, Freddie Mac and Ginnie Mae MBS this year, according to the Federal Housing Finance Agency. At the start of the program in early January, the New York Federal Reserve Bank was purchasing $20 billion to $25 billion in agency MBS a week. Now the Fed is purchasing agency MBS at a $16 billion weekly rate, which means it could continue at that pace for another 10 weeks. At the conclusion of its monetary policy meeting on Dec. 16, Fed officials said they are “gradually slowing” the pace of MBS purchases so the last transactions will be completed by the end of the first quarter of 2010. Mortgage strategists at Credit Suisse say the slowdown in Fed purchases will not affect MBS spreads to any large degree. “The Fed’s exit from the MBS purchase program will likely be well absorbed by the market,” according to a weekly Credit Suisse “Market Watch” publication. After March 31, the “Fed will likely assume a backstop role for the MBS market to prevent a double dip in housing,” Credit Suisse strategists say.

When these programs end we should expect to see mortgage rates rise. Conventional wisdom is they could increase anywhere from 25 to 75 basis points. (There are 100 basis points in one percent.)

The reality is if they rise by more than say 50 to 75 basis points I would expect the Fed to start buying again (and maybe Treasury too).

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